TaxPersonal TaxView from the House – Nick Gibb MP

View from the House - Nick Gibb MP

Nine months into this government and already its central policy plank is falling apart. Labour said it could reform the welfare state, saving billions of pounds.

Aside from the fact that Gordon Brown’s July Budget took #10bn out of the economy in higher taxes, it is now becoming clear that no radical welfare reform will take place. Instead, Labour will fall back onto its usual hunting ground, the middle classes, for prey.

Just before the Christmas recess 47 Labour MPs rebelled against Harriet Harman’s proposals to end the premium paid to lone parents; 25 or more Labour MPs abstained. A large number of other Labour MPs voted with the government against their better judgement and may not do so again in similar circumstances. It was a shot across the bows, and the government will now shy away from any meaningful root-and-branch reform of the welfare state.

So where are the billions to come from which Labour has promised to spend on education and health? From the middle classes, through measures such as taxing Child Benefit, means testing (sorry, affluence testing) or taxing Disability Living Allowance.

I am afraid this is typical of all Labour governments. Already we are paying higher mortgages, there will be higher pension contributions in the pipeline as a result of ending the repayment of dividend tax credits, higher than necessary utility prices as a result of the windfall tax and, of course, higher taxes on savings as a result of the abolition of PEPs and TESSAs.

Their replacement with the new Individual Savings Account regime with its #50,000 lifetime limit will have an adverse effect on those who have prudently saved the maximum possible, through PEPs, which would amount to some #82,200. Together with a #9,000 TESSA, this exceeds the new limit by #41,200 without even taking into account any increase in value in the PEPs.

We can rest assured about one thing, however. When the Social Security Department ‘reviews’ start to report, slick media management will ensure their reports are hyped and we will all be told of momentous reforms to come. The reality will be minor tinkering and, hidden in the detail, will be taxes which middle Britain will pay. Nick Gibb is Conservative MP for Bognor Regis

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